The biggest and richest of the seven emirates could be the driving force behind the UAE economy.
by
Giuseppe Acconcia |
11 June 2019
6 min read
by
Giuseppe Acconcia |
11 June 2019
6 min read
Abu Dhabi's economic growth is not stopping. This is confirmed by the rating agency Standard & Poor's (S&P). According to data released in recent days, the economic growth of the small Gulf country will reach 2.5% in the next four years, benefiting from the increase in oil production and prices. The economy of Abu Dhabi is closely linked to the production and export of oil. According to the S&P report, 50% of its gross domestic product and 90% of central government profits depend on the oil and gas sector as a whole. Despite some attempts to diversify the local economy, the country will remain largely dependent on the oil market in the coming years.
The biggest and richest of the seven emirates that make up the United Arab Emirates (UAE) could be the driving force behind the UAE economy, leading to 2% growth in 2019 after the 1.8% growth achieved last year. The growth forecasts announced in the S&P report are 2.5% in 2020 and 2021, followed by 3% in 2022. That is if the oil price parameters considered by the rating agency of 60 dollars a barrel for 2019 and 2020, dropping to to 55 dollars per barrel in 2021, are respected.
However, not all the data are positive. On May 29 this year, the Central Bank of the UAE announced less brilliant figures than forecast by the International Monetary Fund (IMF) for the third biggest oil producer among the members of the Organization of Petroleum Exporting Countries (OPEC). Growth in the UAE’s oil industry is expected to miss the targets set by the IMF and only reach 2.7%: one percentage point lower than the expected 3.7%. But the real surprise came from the non-oil sector, where growth will stall at 1.8% compared to the 3.4% expected by the IMF reports.
The main concern for the local non-oil sector is the support given by Abu Dhabi to the hard line taken against Iran by the United States, with its unilateral exit from the 2015 Vienna agreement on nuclear power, confirmed by President Donald Trump last May, along with the imposition of new sanctions. And so, on the one hand, three attacks on oil installations and a Saudi gas pipeline in Fujairah showed Abu Dhabi's security vulnerabilities in the event of the outbreak of a conflict in the Strait of Hormuz. On the other hand, non-oil trade between Iran and the UAE amounted to 16.83 billion dollars in 2018. As a result of the new US sanctions, Iranian companies are abandoning the UAE in favor of Oman, Qatar and Turkey, creating considerable tensions between Abu Dhabi and Dubai, which has so far been at the center of trade between Tehran and the UAE. However, recent statements by US Secretary of State Mike Pompeo, apparently paving the way for new negotiations between the United States and Iran, may also have effects on bilateral relations between Iran and the Emirates.
S&P has confirmed the AA rating for Abu Dhabi, emphasizing the economic stability of the Emirate. In particular, the rating agency referred to the great commitment to investment in the country on the part of the Abu Dhabi Investment Authority (ADIA) amounting on average to around 250% of the gross domestic product in the period between 2019 and 2020.
If, as expected, Abu Dhabi is able to finance its tax deficit of 4% of GDP and Eurobond repayments, the wealthy emirate’s public debt will remain stable at no more than 7% of GDP in 2022. Furthermore, according to the report published by S&P, the emirate’s government is not expected to issue bonds in the next two years pending decisions in this respect by the federal government of the UAE.
While Iran moves away, New Delhi moves closer. India continues to focus heavily on trade with the Gulf countries and in particular with Dubai and Abu Dhabi. In recent days, the Indian airline IndiGo inaugurated two flights a day from New Delhi and Mumbai to Abu Dhabi. As confirmed by the local authorities, the increased number of connections shows a strong interest in strengthening the interconnection between India and the United Arab Emirates, particularly in the areas of trade and tourism.
Abu Dhabi's economic growth is driving the economy of the United Arab Emirates. Oil price increases will have a long-term positive effect on an economy highly dependent on the oil sector. The non-oil sector in Abu Dhabi is worried and expected to suffer a setback due to the general tightening of bilateral trade relations between Iran and the United States and between Iran and the UAE. However, major investments and debt containment mean international financial bodies are hopeful about growth in the local economy, above all thanks to the performance of the global oil market.
The author: Giuseppe Acconcia
Giuseppe Acconcia is an award-winning journalist and researcher focusing on the Middle East (London and Bocconi University). Among other publications, he contributed to The Independent, Al-Ahram, Xinhua News Agency and openDemocracy. He has interviewed former Egyptian President Mohamed Morsi, the Arab League Secretary General Nabil Elaraby, philosophers Samir Amin, Noam Chomsky and Nobel Peace Prize Shirin Ebadi. He has published reportages from the Syrian Kurdistan, Iran, Egypt, Libya and the United Kingdom. He graduated at the School of Oriental and African Studies (SOAS) in London writing a dissertation on the role of the military in politics in Egypt, Syria and Iraq. His articles and scientific publications have been translated into French, Spanish, Turkish, Arabic and Chinese. He taught at the American University in Cairo, he worked as a researcher on North Africa and the Middle East, for the Sakharov Prize and the Euro-Mediterranean cooperation. He is the author of Egypt. Military Democracy (Exorma, 2014), Pictures from Gihan (Muta Imago, 2013), The Egyptian Spring (Infinito, 2012) and A two days winter (Fara, 2007).
THIS WEBSITE (AND THE INFORMATION CONTAINED HEREIN) DOES NOT CONTAIN OR CONSTITUTE AN OFFER OF SECURITIES FOR SALE, OR SOLICITATION OF AN OFFER TO PURCHASE SECURITIES OR IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED STATES AND THE DISTRICT OF COLUMBIA) OR FOR THE ACCOUNT OR BENEFIT OF ANY U.S. PERSON AS THAT TERM IS DEFINED IN THE SECURITIES ACT (A "U.S. PERSON"), AUSTRALIA, CANADA, JAPAN OR SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD REQUIRE THE APPROVAL OF LOCAL AUTHORITIES OR OTHERWISE BE UNLAWFUL (THE "OTHER COUNTRIES"). THE SECURITIES REFERRED TO HEREIN HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR PURSUANT TO THE CORRESPONDING REGULATIONS IN FORCE IN AUSTRALIA, CANADA, JAPAN, SOUTH AFRICA OR THE “OTHER COUNTRIES” AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO A U.S. PERSON UNLESS THE SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT, OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT IS AVAILABLE. NO PUBLIC OFFERING OF SUCH SECURITIES IS INTENDED TO BE MADE IN THE UNITED STATES, AUSTRALIA, CANADA, JAPAN OR IN THE “OTHER COUNTRIES.”
In any Member State of the European Economic Area ("EEA"), the information contained in this website is only directed at and may only be communicated to persons who are "qualified investors" ("Qualified Investors") within the meaning of Article 2(e) of Regulation (EU) 2017/1129 (the "Prospectus Regulation").
The information to which this website gives access is directed only at persons (i) who are persons falling within Article 49(2)(a) to (d) ("high net worth companies, unincorporated associations etc.") of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") or (ii) who have professional experience in matters relating to investments falling within Article 19(5) of the Order or (iii) to whom it may otherwise lawfully be communicated (all such persons together being referred to as "relevant persons"). Any investment or investment activity to which this communication relates is only available to relevant persons and will be engaged in only with relevant persons, or in the EEA, with Qualified Investors. Any person who is not a relevant person, a Qualified Investor or otherwise permitted under applicable law or regulation to access the information, should not act or rely on the information contained herein.
Confirmation of Understanding and Acceptance of Disclaimer
These materials are for informational purposes only and are not directed to, nor are they intended for, access by persons located or resident in the United States, Australia, Canada, Japan or South Africa or any of the Other Countries. I certify that:
I am not resident of, or located in, the United States, Australia, Canada, Japan or South Africa or any of the Other Countries or I am not a U.S. Person; or
If I am a resident of, or located in, the EEA, I am a Qualified Investor within the meaning of Article 2(e) of the Prospectus Regulation; or
If I am a resident of, or located in, the United Kingdom, I am a Qualified Investor and a relevant person.
I have read and understood the disclaimer set out above. I understand that it may affect my rights. I agree to be bound by its terms and I am permitted under applicable law and regulations to proceed to the following parts of this website.
WARNING: the above certification constitutes a "self-certification" pursuant to Decree of the President of the Italian Republic No. 445 of 28 December 2000. False certifications are punishable by law.
You must read the following information before continuing.
The information contained in this segment of the website is not intended for, and must not be accessed or distributed or disseminated to persons resident or physically present in the United Kingdom, Canada, Australia, Japan or any other jurisdiction in which it is unlawful to do so. The information also is not intended for, and must not be accessed or distributed or disseminated to persons resident or physically present in Italy who are not “qualified investors” (investitori qualificati), as defined in Article 2, letter e) of Regulation (EU) 2017/1129 (the “Prospectus Regulation”) pursuant to Article 1, fourth paragraph, letter a) of the Prospectus Regulation as implemented in Italy by Article 35, paragraph 1, letter d) of CONSOB regulation No. 20307 of February 15, 2018.
By clicking the button below labeled “I agree”, you are certifying that (A) if you are in the European Economic Area, you are a “Qualified Investor”; (B) you are not accessing this portion of the website from the United Kingdom, Australia, Canada or Japan; (C) if you are a resident or physically present in Italy, you are a qualified investor as defined under the Prospectus Regulation as implemented in Italy by Article 35, paragraph 1, letter d) of CONSOB regulation No. 20307 of February 15, 2018; and (D) you are not located in a jurisdiction where it is unlawful to access this portion of the website.
You acknowledge that the information and statements contained in the document you are accessing on this website speak only as of the date of such document (or such other date(s) specified therein), and such information and statements may become inaccurate, stale and/or out-of-date thereafter and should not be relied upon for any investment decision.
You acknowledge that the materials on this website that you are accessing are confidential and intended only for you and you agree you will not forward, reproduce, copy, download or publish any of such materials (electronically or otherwise) to any other person if this is not in accordance with the law.
You acknowledge that the access to information and documents contained on this portion of the website may be illegal in certain jurisdictions, and only certain categories of persons may be authorized to access this portion of the website. If you are not authorized to access the information and document contained on this portion of the website or you are not sure that you are permitted to view these materials, you should leave this portion of the website.
You acknowledge that no registration or approval has been obtained and Eni Gas e Luce S.p.A. società benefit and its affiliates assume no responsibility if there is a violation of applicable law and regulation by any person.
By clicking the button below labeled “I agree”, you are confirming that you have read and understood the disclaimer above.
If you cannot so confirm, you must exit this portion of the website
